As housing affordability worsens in Sydney and Melbourne, a classic battle is unfolding between BRW Rich Lister developer Tim Gurner and local residents in the gentrifying inner Melbourne suburb of Fitzroy North over an apartment project.

Mr Gurner, one of the country's most successful young developers, originally planned to develop a $350 million apartment block with almost 500 dwellings on an 8500 square metre former industrial site on Queens Parade, which he bought last year for $40 million.

He says his development, where one-bedroom apartments starting from $375,000 will make up 40 per cent of the stock, will add much needed and more affordable housing options in a suburb where the median house price has surged to nearly $1.5 million.

But a group of local residents have mounted a well co-ordinated public campaign to attack Mr Gurner personally and gather support to block the development. This included circulating a misleading image about the scale of the project, forcing Mr Gurner to take legal action.

The original 16-storey proposal for 26-56 Queens Parade is being re-worked
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Residents have been supported by the local authority, the City of Yarra, which referred Gurner's development application to planning tribunal VCAT in December. This week the City of Yarra took the unprecedented step of seeking authorisation from the Victorian Planning Minister Richard Wynne to impose an eight-storey height limit over the Queens Parade precinct.

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In Sydney, too, the same issue has arisen. Residents in inner west Leichhardt, through their council, have resisted developer efforts to convert low-rise industrial property into apartments.

Re-working the proposal

Mr Gurner says he has listened to the community – an open-door community consultation will take place on Tuesday – and is substantially re-working his original proposal, including reducing the height and cutting out about 120 apartments ahead of a VCAT hearing in April.

But were the Planning Minister to agree to an eight-storey height limit over the site (a decision is not expected for six to eight weeks), Mr Gurner believes it would set a dangerous precedent for higher density development in Melbourne's inner suburbs while also making his project much harder to stack up financially.

Amanda Stone: Growth needs to be managed
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"It worries me that this project sets a precedent for not-in-my-backyard [nimby] locals being able to use political pressure against councils and politicians to suit the minorities wanting to protect their backyards," he told The Australian Financial Review.

"Every single one of our apartments will cost 20 to 75 per cent less than the median house price in Fitzroy North and provide the next generation with an opportunity to live in the area," he said.

City of Yarra mayor Amanda Stone told The Australian Financial Review that what Mr Gurner was proposing was too high and too dense for the site. She argued it was not an affordable housing solution when comparing a three-bedroom apartment in the development with an existing house in Fitzroy North.

"You're comparing apples with apples," Cr Stone said. "It won't deliver a community net benefit other than packing in more housing.

"I agree there is a need for more housing. Absolutely. There is also a place for high density and this site can take more height but, after listening to the local community, we believe eight stories is sufficient.

Expert advisers

"Residents are facing massive change so have understandably reacted in a very human way. Most residents accept growth, but it needs to be managed through planning controls."

Mr Gurner said the City of Yarra was ignoring the recommendations of its own expert advisers (which recommended a 10-storey limit), and instead listened to a small minority of local Baby Boomers.

"Most of the objectors to our case all bought houses in the area when they were affordable at $140,000 to $180,000 in the 1990s and now their homes are worth $1.5 to $2 million and totally unaffordable for the next generation who didn't get to ride the property market boom," he said.

Without commenting specifically on the Gurner proposal, Jeff Provan, a director at Melbourne developer Neometro, said he believed developers often had themselves to blame when seeking to build apartments in the inner suburbs.

"There's a couple of things driving these battles," he told The Australian Financial Review. "There's a desire among developers to get more density from their sites because they may have overpaid for them so there's pressure to get enough yield. There's also a bit of greed involved."

Mr Provan said developers were often not in touch with the concerns of the community and instead preferred to "put on the boxing gloves".

"Some projects are really bad developments that overshadow everything so I see where residents are coming from," he said. "There will always be push back when developers are trying to do too much."

Accommodating inner suburbs

A report released last year by the public policy think tank The Grattan Institute found the inner suburbs within five kilometres of Melbourne, Sydney and Brisbane were in fact very accommodating of apartment development.

​Instead, the institute found the problem of nimbyism to be in the middle ring suburbs, between five and 20 kilometres from the city centre, where it found "almost no change" in population density in 30 years, especially in Melbourne but also in Sydney.

Mr Gurner has completed more than 20 projects in the City of Yarra, and the hipster suburb of Collingwood is the location for a number of successful developments.

His latest project in Fitzroy North is one of his most ambitious in the area, but he says the size of the site and its status as one of only six strategic major development sites in the City of Yarra allows for a project on a much bigger scale.